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To: sciAticA errAticA who wrote (31134)	4/9/2003 9:00:49 AM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

Goldman, CSFB Seen at Risk in IPO Suit By REUTERS Filed at 9:02 p.m. ET NEW YORK ( Reuters) - Goldman Sachs Group (GS.N), Morgan Stanley (MWD.N), and Credit Suisse First Boston (CSGZn.VX) face the biggest penalties in a wide reaching lawsuit that alleges Wall Street banks rigged hundreds of IPOs, according to an analyst's report. The three investment banks underwrote the majority of 309 initial public offerings implicated in the suit. As a result, they stand to pay the lion's share of a settlement that could total as much $4 billion, according to research company CreditSights Inc. ``The banks themselves are saying that they're concerned,'' said CreditSights analyst David Hendler, referring to warnings about ongoing civil litigation made by investment banks in their annual reports. ``If they're concerned, then why shouldn't we be concerned.'' Investors suing 309 issuing companies and 55 investment banks won a battle in February when a federal judge rejected a motion to throw the suit out. As the case heads toward trial, there is expected to be more pressure to settle. Led by class action attorneys, investors allege there was industrywide misconduct to artificially boost demand and the price of shares. Among the complaints: that analysts manipulated the market with optimistic research; that banks ramped up commissions in exchange for access to IPO shares; and that investors allocated IPOs were required to buy shares in the after-market in a practice known as ``tie-ins.'' Some market watchers point out that it is too early to predict a settlement, and that if the suit is settled, plaintiffs' lawyers would settle for substantially less than $4 billion. SETTLEMENT COULD CUT INTO EARNINGS Furthermore, in a bear market when revenues have fallen, investment banks will be more likely to fight allegations to try to avoid paying penalties, said Lehman Brothers financial services analyst Brock Van Der Vliet. ``We reserve for litigation expenses when they are probable and estimable,'' said a Goldman spokeswoman. ``We are very comfortable with the reserves we have.'' A spokeswoman at Morgan Stanley did not return a call for comment. Credit Suisse declined to comment. A $4 billion settlement would substantially cut into banks' annual earnings, according to Hendler. Thus far, the potential impact hasn't been priced into share prices, and as a result some banks' stocks are overvalued, he said. CreditSights made its estimates by taking 7 percent of the market capitalization losses of the 309 companies since their IPOs, a formula drawn from legal experts according to Hendler. Compensation was made for a 70 percent drop in the Nasdaq stock market. Goldman and CSFB, which between them underwrote half of the IPOs in terms of proceeds raised, stand to pay as much as $1.1 billion and $934 million, respectively, according to CreditSights. Those settlement penalties would account for 33 percent of Goldman's estimated earnings for 2003, and 98 percent for CSFB's earnings. Morgan Stanley, which underwrote 22 percent of the IPOs in terms of proceeds, faces $903 million in settlement penalties. That penalty would account for 17 percent of Morgan Stanley's estimated 2003 earnings. Among other banks, CreditSights estimates that Merrill Lynch (MER.N) faces penalties of $326 million, FleetBoston Financial faces paying $383 million, and Lehman Brothers (LEH.N) will have to pay an estimated $158 million. Goldman Sachs shares ended up 39 cents at $72.70 on the New York Stock Exchange. Morgan Stanley closed up 23 cents at $42.42. nytimes.com